renting converted outbuilding to daughter - AST? housing benefit?

[hepsebah]

Hello there, we are in the process of converting an outbuilding to a 2 bed property which we are going to rent out to our daughter & son-in-law (our daughter has not lived here for many years). The new property is subject to a section 106 meaning that it cannot be sold seperately.

Can the property be considered to be a seperate dwelling for the purposes of council tax and housing benefit? Can we sign a normal assured shorthold tenancy with them? It is physically removed from our house but shares a drive. They are expecting a child & would probably otherwise qualify for HB while on maternity leave if they lived in a privately rented property, but I know HB cannot be paid to relatives if they live in the same dwelling.

We financed the conversion on the basis that they would pay rent so will have difficulties if they cannot meet the payments. Any advice would be very gratefully recieved.

[jeffrey]

Granting an AST will not fall foul of the 'not to be sold separately' rule imposed by the Agreement under s.106 of TCPA 1990. Council Tax/Local Housing Allowance (ex-HB) rules do not restrict lettability. Anyway, it is still a separate dwelling even if you cannot lawfully sell it as such.

[caroline7758]

You may have to prove to the HB department that it is a "commercial" agreement and that your daughter is not living in your property (in which case she couldn't claim HB) Talk to your local authority about what proof they need.

[jeffrey]

You may have to prove to the HB department that it is a "commercial" agreement and that your daughter is not living in your property (in which case she couldn't claim HB) Talk to your local authority about what proof they need.

Perhaps the Planning Permission and s.106 Agreement, together proving that it is a separate dwelling, might be sufficient.